Every business has to make numerous decisions in day to day business activities. Small business owners and entrepreneurs are considered the serial decision-makers for their roles in business decision making. The success of a business largely depends on good decisions made at the right time. A proper decision-making process helps the business owner to make good business decisions that can lead to greater profitability. Thus, a small business should follow these easy steps to ensure good business decisions.
Step 1: Defining the target outcome
The first step in making good business decisions is to find out and understand the targeted outcome of the
decision-making process. In this case, the mission of the business decision-making process can be a business
problem to solve, achieving the business goals, or making a decision on business strategy implementation.
For example, the mission of decision-making can be to increase organizational efficiency by reducing resource
wastage or to maintain steady cash inflow in the business.
Step 2: Understand the business and industry
For good business decision making, the key is to understand the goals and objectives of the business along with
the business culture. Thus, decision-making should be based on organizational goals, strategies, and policies.
Moreover, the business owner needs to assess industry conditions and consumers to determine its competitive
environment so that the owner can make the most effective decision that fulfills customers’ needs and wants
and also ensure a competitive advantage.
Step 3: Determine and assess available alternatives
Information is the key to a good business decision. For this, the business owner needs to gather information as
much as possible regarding the available alternative solutions for the underlying problem or approaches for
achieving strategic goals. A small business can easily assess the relevance and efficiency of the alternatives by
comparing those with the business goals and objectives. After that, the business can choose the most matched and appropriate alternative to implement in the business.
Step 4: Projecting the effects of the decision
Before finalizing the decision, the business owner should assess what would be the aftermath of taking the
underlying decision. It is important to determine whether the selected alternative can achieve the desired
outcome and how the decision will help to achieve the goals and objectives of the small business. The business owner needs to consider whether the result of the decision aligns with short-term and long-term business goals and the overall vision of the organization.
Step 5: Determine the possible drawbacks of the decision
Since the future is unpredictable, any proper decision can have some unexpected drawbacks. For this reason, the business owner should assess the possible costs of the decision. If there are any drawbacks, it should also be determined how the business will tackle those drawbacks and make the decision most effective.
Step 6: Make a plan to implement the decision
To successfully implement the decision and achieve the intended result, the business owner needs to make a strategic plan. In this case, the owner should determine the needed resources, task schedule, and roles of related parties in implementing the decision in business activities.
Step 7: Decision implementation and control
The success of decision-making not only depends on proper implementation but also on proper monitoring and control. In this case, the small business should monitor whether the implemented decision has fulfilled the initial
mission. Moreover, the business owner should assess whether the taken decision is fulfilling the short-term goals
and objectives of the organization and has the potentiality to fulfill long-term objectives. If there is any
weakness found the small business should take immediate action to make changes and ensure the effectiveness of the implemented decision.
Therefore, a good business decision-making process can help a small business to achieve its short-term and
long-term goals and objectives. By following the seven steps mentioned above, the small business can make
good decisions in every business activity. For example, a key problem that every small business faces is the
insufficiency of cash inflow in the business. Invoice financing a promising option to ensure steady cash inflow
and also to decrease the cost of financing. In this case, to decide whether to use invoice financing as a short-
term financing source, the small business can use the easy 7 steps of a good decision-making process.
Accordingly, for step 1, the mission of the decision-making process is to reduce the cost of financing and ensure
a steady flow of finances to meet short-term business obligations and expenses and also to capture new
opportunities. As step 2, a small business can assess its business function and if the business has a significant
amount of accounting receivable as the outstanding invoices, then it can use invoice financing to release the
funds from outstanding invoices quickly. For step 3, the small business can assess which method of invoice
financing would be most appropriate such as invoice factoring and invoice discounting. Following the step 4 and 5 of good decision making, the small business can easily find out that invoice financing is the lowest cost financing source that reduces the time of collecting short-term funds and also has no risks of bankruptcy like other financing sources such as bank loans. After that in step 6, the small business can negotiate the terms of invoice financing with the factoring bank and collect the required funds to fulfill the goals of the business. Finally, the business owner can assess how invoice finance has been successful in providing urgent cash inflow to meet business obligations, or finance new investment in capturing new business opportunities and thus, help in improving overall business performance and achieve competitive advantage.